According to the US Treasury Department, the US authorities have pledged to closely monitor the currency policy of the People's Republic of China. The US watchdog states that it is going to keep an eye on the yuan exchange rate.
The US government has once suspected China of manipulating the exchange rate of the national currency. Notably, the status of a currency manipulator is given to those countries whose governments and central banks deliberately restrain the strengthening of the national currency. By taking such measures, they can give exporters a head start. The US Treasury has already designated Switzerland and Vietnam as currency manipulators.
Earlier this year, before the COVID-19 pandemic, Switzerland and Vietnam devalued their currencies against the US dollar to gain the upper hand in trading. However, China has not been labeled a currency manipulator despite the suspicions of the US authorities. At the same time, Washington is going to closely watch the currency regulation of China, South Korea, Thailand, and India as they all have long been included in its monitoring list.
Importantly, the US reserves the right to label a country a currency manipulator if it has a $20 billion-plus bilateral trade surplus with the US and a global current account surplus of more than 2% of GDP. In addition, a foreign currency intervention rate should be higher than 2% of its GDP.
The US is strongly determined to reveal all potential currency manipulators. At the same time, Janet Yellen, the former chairman of the Federal Reserve and a possible candidate for the post of US Treasury Secretary, adheres to a more balanced approach when it comes to the evaluation of foreign countries’ monetary policies. She is also very cautious about tagging a country a currency manipulator. Therefore, experts think that Joe Biden’s team is likely to revise the currency manipulators’ list and loosen tough surveillance over China.